Citizenship-for-Cash Program in Malta Stirs Security Concerns in European Union

By DAN BILEFSKY

April 5, 2014

PARIS — A program in Malta that offers citizenship for cash is raising concern among officials who fear it could open a back door into Europe and the United States for swindlers, criminals or terrorists who can afford the price tag of up to $1.57 million.

The program, which was begun in February, has already attracted interest from hundreds of applicants, including Chinese billionaires, wealthy Russians and executives from countries like Saudi Arabia, Iraq, United Arab Emirates and Libya.

Citing worries about security, opposition leaders in Malta, a Mediterranean island 50 miles south of Sicily, moved last month to block the plan. But the motion was defeated and the governing Labour Party, which has a large majority, is forging ahead with the program, which it hopes will raise $1.9 billion for development projects and job creation.

Though Maltese officials say the plan will attract foreign investment and lift the economy, critics fear that in a race for cash, the screening process will be shortchanged — particularly since the tiny nation has outsourced the vetting of citizenship applicants to a private company that stands to make tens of millions of dollars in commissions if applicants are accepted.

European Union officials are among those most concerned. Though selling citizenship outright is rare, Malta’s move comes as a growing number of European countries buffeted by economic hard times, including Portugal, Spain and Greece, are dangling the possibility of residency to high-flying foreigners in return for substantial investments. The United States also offers residency, though not citizenship, for entrepreneurs who invest at least $1 million and meet other criteria.

Opponents of the program in Malta say most potential applicants have no interest in Malta, per se, but covet a European Union passport, which would allow them to live or work elsewhere in the union, including in London or Paris. Under threat of legal action by the European Commission, the union’s executive body, Malta tightened the law in January and added a one-year residency requirement before an applicant can get a passport.

Jason Azzopardi, home affairs spokesman for the opposition National Party, said the news that two passengers on a missing Malaysian jet were traveling on stolen passports, despite having been vetted by immigration and security officials, underlined the danger of passports’ being abused. “The fear is that people with serious criminal records, scam artists or even terrorists could buy their way into the country and use Malta as an illegal gateway for Europe,” he said.

The citizenship offer — which will enable travel within the European Union’s 27 other member states and visa-free trips to 69 countries outside the bloc, including the United States — comes at a steep price: $891,000 in cash, and up to $685,000 in property and investments.

Officials in the government of Prime Minister Joseph Muscat reject criticism that the plan is a get-rich-quick scheme that could expose Europe to a flood of undesirable entrants. “We are not trying to make a quick buck,” Kurt Farrugia, a government spokesman, said in a phone interview. “We are a small country, and we want people to know about us and invest in our country.”

Mr. Farrugia insisted that the screening would be rigorous and that the government would make the final decision on citizenship for each applicant.

But opponents say they are concerned about a potential conflict of interest in the vetting process, which is being subcontracted chiefly to Henley & Partners, a consulting firm based in the British Channel Islands. The company is both recruiting applicants and examining them to weed out criminals, terrorists and other questionable characters.

Eric G. Major, the chief executive of Henley & Partners, said in a telephone interview that Iranian and Syrian applicants would not be accepted because of the international sanctions imposed against those countries. He said those interested in the program came mainly from countries from which travel is restricted.

“They can get the travel monkey off of their backs,” Mr. Major said. Those with murky pasts, he added emphatically, need not apply.

Under its contract with the government, Henley gets a 4 percent commission on the $891,000 fee. It will also charge client fees of $96,000 for each applicant. After vetting applicants, Identity Malta, a government agency, will make a final decision based on Henley’s recommendation. Henley will get its commission only if an applicant is accepted.

Mr. Major said there was no conflict of interest because Henley had created a strict separation between the departments doing marketing and vetting.

Opponents say they are particularly concerned about a provision in the law that allows someone with a criminal record to obtain citizenship, at the discretion of the internal affairs minister, if the Maltese agency overseeing the program is “satisfied that the applicant is still worthy of being considered for approval due to special circumstances.” Among the worries is that wealthy criminals could abuse this provision by claiming they are fleeing politically motivated charges.

Mr. Major said the vetting process encompassed multiple steps, including criminal and financial background checks using online databases, vetting by independent security contractors and an analysis using risk assessment software. He said the Maltese government would then do its own checks through resources such as Interpol and American government agencies.

American officials said the United States reviewed the security impact of its visa waiver programs with individual countries every two years. They stressed that visa-free travel does not guarantee admission to the United States.

So-called golden passport or residency programs have long faced controversy, immigration experts say, including questions about money laundering and fraud. Canada, citing widespread abuses, announced last month that it would scrap a program that had offered permanent residency to foreigners who gave the government a $730,000, interest-free loan for five years.

Some people with criminal records have slipped through the cracks in countries offering immigrant investment programs.

The Internet entrepreneur Kim Dotcom, who is wanted in the United States on charges of copyright infringement committed by his now-defunct file-sharing company, Megaupload, was granted New Zealand residency in 2010. He had invested about $8 million in a program for wealthy foreigners, despite convictions for insider trading and fraud in his native Germany. In 2012, he was arrested in Auckland at the request of United States officials, and he is now fighting an attempt to extradite him.